The chips are down: Frito-Lay stops shipments to Loblaw stores over price-increase dispute - The Globe and Mail | Canada News Media
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The chips are down: Frito-Lay stops shipments to Loblaw stores over price-increase dispute – The Globe and Mail

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A standoff has emerged between Canada’s largest grocer and one of the world’s largest packaged-goods companies, over the price of potato chips.

But the dispute – which has led PepsiCo-owned potato-chip manufacturer Frito-Lay to cut off shipments to stores owned by Loblaw Cos. Ltd. L-T – goes beyond the snack aisle. Product suppliers and retailers have been in more intense negotiations in recent months, as inflationary pressures have led suppliers to hike prices for the products that stock the shelves.

La Presse first reported last week that Frito-Lay had stopped shipments to Loblaw. The chief executive officer of industry group Food, Health & Consumer Products of Canada (FHCP) confirmed the cut-off in an interview on Tuesday, and said the retailer had refused a price increase of less than 10 per cent. Frito-Lay manufactures brands that include Lay’s, Doritos, Miss Vickie’s and Tostitos.

Spokespeople for Loblaw and PepsiCo Foods Canada declined to comment specifically on the matter, although PepsiCo did confirm it has requested price hikes for its products, citing “unprecedented pressures” as costs rise for ingredients, packaging and shipping.

“To help offset these pressures on our Canadian operations and to ensure that we maintain the high quality our consumers expect, we have made adjustments to our prices that are consistent across the marketplace,” PepsiCo spokesperson Sheri Morgan wrote in an e-mail. “We are committed to our Canadian manufacturing and operations and our products remain widely available from coast to coast.”

Grocery prices rose by 6.5 per cent in January compared with the same time last year, Statistics Canada reported last week, an acceleration from the 5.7-per-cent increase reported for December.

Minimizing price hikes for shoppers has become more difficult as cost pressures intensify, Loblaw spokesperson Catherine Thomas wrote in an e-mail.

“When suppliers request higher costs, we do a detailed review to ensure they are appropriate,” Ms. Thomas wrote. “This can lead to difficult conversations and, in extreme cases, suppliers don’t ship us products.”

A manufacturer cutting off shipments to a retailer used to be relatively rare, but such instances have become more frequent in recent months, FHCP CEO Michael Graydon said. Such disputes are usually resolved behind closed doors. What is unusual here, he said, is the size of the players involved and the fact that the dispute has become public.

“Everybody is in discussion because everybody’s impacted across every category in the store – from plastic bags, to potato chips, to cereal, to shampoo,” Mr. Graydon said. “Because of the magnitude of asks – there’s just so many of them – [retailers] are starting to push back. … [Suppliers] are just not going to put their businesses in economic jeopardy by not getting the price increases that are necessary to recoup costs.”

Late last year, executives at Loblaw, Metro Inc. and Sobeys owner Empire Co. Ltd. all confirmed product suppliers began seeking price increases in the summer, responding to those pressures. In a conference call to discuss Loblaw’s earnings in November, chairman and president Galen G. Weston said the company had refused supplier increases that he called “unjustified” or “detrimental to the customer experience,” as teams worked to minimize price hikes on store shelves.

“There’s an enormous amount of concern because several of those increases were way beyond what you would be able to justify because of food inflation and additional costs,” said Diane Brisebois, president and CEO of industry group the Retail Council of Canada, adding that Canadian shoppers are price-sensitive, especially right now. “Grocers are the ones who look customers in the eyes when they price their products.”

Disputes over price negotiations are nothing new in the grocery industry. In 2020, for example, complaints were lobbed in the opposite direction when a number of grocers notified product suppliers about hikes in fees the retailers charge for things such as shelf placement and in-store promotions. Continuing tensions between grocers and suppliers have motivated discussions around a code of conduct for the industry.

But Mr. Graydon, who is part of an industry group that supports such a code, emphasized while the proposed code would include a dispute-resolution process, it would not eliminate such conflicts over price negotiations entirely. He pointed out that retailers and vendors in other markets that do have a code, such as in Britain, have seen an increase in disputes as inflationary pressures mount.

Complicating this dynamic, is the fact that many grocers have invested heavily in producing private-label brands that compete with suppliers. In Loblaw stores this week, the dispute has led to some empty shelves, which the retailer is partly filling with its own house brand chips, said Sylvain Charlebois, a professor of food policy and distribution at Dalhousie University in Halifax.

He says he believes there are more battles to come.

“Inflation is putting way more pressure on that dynamic between grocers and processors,” Prof. Charlebois said. “There’s a lot of tension right now.”

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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